Practice Management

Introduction to population management


  • Health care (access, cost, quantity, and quality of health care services).
  • Individual behavior (including diet, exercise, and substance abuse).
  • Genetics.
  • The social environment (education, income, occupation, class, and social support).
  • Physical environment (air and water quality, lead exposure, and the design of neighborhoods).

IHI operationally defines population health by measures such as life expectancy, mortality rates, health and functional status, the incidence and/or prevalence of chronic disease, and behavioral and physiological factors such as smoking, physical activity, diet, blood pressure, body mass index, and cholesterol.5

On the other hand, population management is primarily concerned with health care determinants of health and, according to IHI, should be clearly distinguished from population health, which focuses on the broader determinants of health.5

SHM President Ron Greeno, MD

Dr. Ron Greeno

According to Ron Greeno, MD, MHM, one of the founding members and a past-president of the Society of Hospital Medicine, population management is a “global approach of caring for an entire patient population to deliver safe and equitable care and to more intelligently allocate resources to keep people well.”

Population management requires understanding the patient population, which includes risk stratification and redesigning and delivering services that are guided by integrated clinical and administrative data and enabled by information technology.

Cost-sharing payment models

The cornerstone of population management is provider accountability for the cost of care, which can be accomplished through shared-risk models or population-based payments. Let’s take a closer look at each.

Under shared-risk models, providers receive payment based on their performance against cost targets. The goal is to generate cost savings by improving care coordination, engaging patients in shared decision making based on their health goals, and reducing utilization of care that provides little to no value for patients (for example, preventable hospital admissions or unnecessary imaging or procedures).

Cost targets and actual spending are reconciled retrospectively. If providers beat cost targets, they are eligible to keep a share of generated savings based on their performance on selected quality measures. However, if providers’ actual spending exceeds cost targets, they will compensate payers for a portion of the losses. Under one-sided risk models, providers are eligible for shared savings but not financially responsible for losses. Under two-sided risk models, providers are accountable for both savings and losses.

With prospective population-based payments, also known as capitation, providers receive in advance a fixed amount of money per patient per unit of time (for example, per month) that creates a budget to cover the cost of agreed-upon health care services. The prospective payments are risk adjusted and typically tied to performance on selected quality, effectiveness, and patient experience measures.

Professional services capitation arrangements between physician groups and payers cover the cost of physician services including primary care, specialty care, and related laboratory and radiology services. Under global capitation or global payment arrangements, health care systems receive payments that cover the total cost of care for the patient population for a defined period.

Population-based payments create incentives to provide high-quality and efficient care within a set budget.6 If actual cost of delivering services to the defined patient population comes under the budget, the providers will realize savings, but otherwise will encounter losses.

What is next?

Now that we have explained the impetus for population management and the terminology, in the next article in this series we will discuss the current state of population management. We will also delve into a hospitalist’s role and participation so you can be aware of impending changes and ensure you are set up for success, no matter how the payment models evolve.

Dr. Farah is a hospitalist, physician adviser, and Lean Six Sigma Black Belt. She is a performance improvement consultant based in Corvallis, Ore., and a member of The Hospitalist’s editorial advisory board.


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2. Source: the-u-s-falls-short/

3. Kindig D, Asada Y, Booske B. (2008). A Population Health Framework for Setting National and State Health Goals. JAMA, 299, 2081-2083.

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